Life is unpredictable.
As Chicago Bears Hall of Fame running back Walter Payton once said, "Remember, tomorrow is promised to no one." Payton died at 45 from a rare liver disease. It is always a tragedy when life ends short. It is comforting to know that Walter Payton's family will be financially secure despite his passing on.
What would happen to the average man though?
Brad Cunard was one of those unfortunate stories. While stuck in traffic with his wife Lisa and two boys, Max and Owen a violent thunderstorm hit. "Nothing could have prepared Brad for what happened next. A tree fell on their car with horrible precision, instantly killing Lisa, 38, and their boys, who were three years old and five months. Brad had always believed he and Lisa would live to enjoy Little League games, proms and grandchildren. Now he found himself alone, not sure how he'd pick up the pieces."
Luckily, Brad and his wife had purchased life insurance, which gave him the financial security to grieve. "The money won't bring Lisa, Max or Owen back, but it makes the existence I find myself in easier. I don't have to work while I'm not ready, or sell my house because I can't afford the mortgage. I've been able to think slowly about my future," Brad says.
The insurance money also helped keep Brad's business running while he was home. Brad says because of financial planning, "I know I'll do better than survive. I'll live and succeed in the second chapter of my life and make my family proud."
Insurance firms offer various insurance policies depending on the individual. For example, Term insurance is inexpensive, but is for a limited time and does not build cash values. Permanent life insurance, like a whole life policy, has a fixed premium at date of issue that never increases. If it's a mutual company, they pay dividends that can be applied to reduce the premium. A valuable part of a whole life policy is the build up of guaranteed cash values that can serve as a reserve that can be used for educational, retirement or other needs.
Term, which is sometimes referred to as temporary insurance, an individual buys a policy for a specific time (1yr, 10 years or even a 30 year span) where a death benefit is paid to the beneficiary if the insured dies during that period. For a healthy almost 40-year old man, this could amount to $15 a month for this policy that would provide a $100,000 payment if the insured dies during the time period he selected.
Whole life insurance can cover an insured for his or her lifetime. The payout is assured at the end of the policy (assuming the policy is kept current) and the policy accrues cash value." Upon death, the proceeds from the policy are paid tax-free to the beneficiary. This offers consumers guaranteed cash value accumulation. This whole life policy is considerably more expensive than term insurance, but offers a premium that never increases and the policy holder can build guaranteed cash values.
The whole life plan offers the insured $100,306 in death benefits. The permanent plan also costs more because it gives the same insurer $192,785 at age 65 in retirement benefits. You can also have a combination of term and whole life insurance to make a policy that covers the specific needs of a family. Whole life insurance builds guaranteed cash value and although dividends are not guaranteed, diviidends can provide additional benefits.
Everyone has different circumstances; however both plans offer some financial security for individuals and their families. Many people think they can't afford insurance so they never consider the option. But $15.49 is an amount most can pay. The cost of not having insurance can be a big toll for a family.
Kent Schiner, a financial adviser (CLU, ChFC), has been in the life insurance business for several decades. Mr. Schiner has had clients pass away from accidents and illness, some at a very young age. He is also a firm believer in guaranteed cash values. Many of his clients from time to time have borrowed against their life insurance policy for unexpected expenses or opportunities.
"Life insurance is a character purchase because it is for the benefit of another even though the insured has use of the cash values during his lifetime; a win-win situation," Mr. Schiner says.
The alternative of not having this coverage is often grave. Even retired parents have to shoulder costs that were once unimaginable. One mother writes, "It was a single car accident at 12 midnight, he fell asleep at the wheel on his way home after being out working since 5 am." Her son had started his own business and applied for life insurance. The policy papers needing his signature showed up 3 days after the car accident.
How sad.
This man had a wife and 5-month-old child. He also had a mortgage payment. His mother explains, "His wife tried to get a job but child care cost more than she could make. I live in a different state and cannot help with that. I gave them every penny I had to get the business started. There is no money left. The business has no money to give back since it was all put into start up costs. Some supplies are left and will be sold but it won't make enough to carry her through. She has decided to put the house up for sale and move in with her mother for now."
So the moral of the story is be prepared for the worst. Life insurance is an avenue to protect your family at reasonable cost along with funding a substantial cash reserve. build wealth and have a reserve in case unexpected expenses come up. Hope for the best and prepare for the worst.
